Residential Loans

First Point Group can access some of the BEST RATES in the market

Home Loans
Equity Line of Credit Facilities
Residential Investment Property Loans
Finance for Residential and Land Development
Investment Loans for Shares or Managed Funds
Building Purchase and Construction

Property FAQs

Types of Residential Loans

First Point Group can access some of the BEST RATES in the market

We specialise in all types of home loans including:

Home Loans
Equity Line of Credit Facilities
Residential Investment Property Loans
Finance for Residential and Land Development
Investment Loans for Shares or Managed Funds
Building Purchase and Construction

We regularly deal with all major and “second tier” lenders, and we also access a number of lenders that are not available to the general public.

Our Lenders

What Happens on Settlement Day?

When You Buy a Property – What Actually Happens At Settlement?

When you purchase a property, the concept of what actually takes place on the “settlement day” can be confusing. Below is a quick summary:

Prior to Settlement:

Your conveyancer will obtain “cheque directions” from the Vendor’s conveyancer (ie. who to make your funds payable to, be it your own cash or your new home loan)
Your First Point Group Consultant will put your conveyancer in touch with the Lender so they can advise the Lender who to make your loan proceeds payable to
Typically 1-2 days prior to settlement your conveyancer will ask you for your final cash contribution – usually in the form of a bank cheque which you need to obtain

On Settlement Day:

At a pre-arranged time, the Lender, your conveyancer, the vendor’s conveyancer and often Vendor’s discharging financier will physically meet to enable the “settlement” to occur.

They each bring the following to the table:

Your conveyancer brings your bank cheque for your final contribution – this is handed to the Vendor’s conveyancer
Your Lender brings a bank cheque for the loan proceeds (minus stamp duties and bank fees) – this is also handed to the Vendor’s conveyancer. The Lender will later pay the stamp duty fees directly to the State Revenue Office
The Vendor’s discharging financier brings the discharge of mortgage & certificate of title to the property being purchased
The Vendor’s conveyancer will obtain the Certificate of Title for the property and hand it to the incoming Lender so they can register the Mortgage of Land (if you were paying cash for the property then the Certificate of Title would be handed to your conveyancer)
The Vendor’s conveyancer would normally call the real estate agent to let them know that settlement has gone through
You pick up the keys to your new property! If you have any queries in relation to the loan process or indeed any finance related matters please contact our office.

What does a Finance Broker do?

First Point Group is a team of highly experienced, qualified finance professionals that also access leading edge software to assist in matching your personal and business needs to the market. First Point Group provides you with a professional approach to residential and commercial mortgage broking.

With First Point Group’s leading edge mortgage software and many years of experience, our Mortgage Brokers search hundreds of loans from an extensive panel of lenders and find the one that suits you.

Read our 10 Step Loan Process which outlines our “end to end” service in more detail.

Our Finance and Mortgage Brokers are experts who you should speak to when thinking about buying a home, refinancing, buying an investment property, business finance, lease or commercial property finance.

What is Offset, and what is Redraw?

Offset Accounts and loan Redraw facilities are very similar in nature, with both allowing a borrower to make additional payments against their variable rate loan, thereby reducing interest on the loan.

With an offset account, a separate savings/transactional account is established whereby

The amounts deposited by the borrower into the offset account in most cases do not derive interest income
But they effectively reduce the amount of interest payable/calculated on the linked loan account (ie. the “net loan balance”)

With a redraw facility, no separate savings/transactional account is created. Instead, the borrower can make additional repayments directly into their variable rate loan, and subsequently “redraw” the additional amounts at a later point in time.

Effectively, the same outcome when the lender calculates your interest payable.

Which is better for me?

Offset accounts and redraw are very different when funds are required at a later time (eg. taken out of offset or redraw, in the future).

Assume two people have their own $100,000 home loans:

Borrower 1 makes $30,000 worth of additional repayments against the home loan.
Borrower 2 puts $30,000 into an offset account where the balance in the offset against the gross loan balance.
Effectively both borrowers currently pay interest on the home loan equivalent of $70,000.

Both borrowers then wish to purchase a new property to be used as their home “Principal Place of Residence” (PPR) but wish to retain their existing PPR, as an investment property.

Question — Can borrower 1 redraw from the home loan (equivalent to the extra repayments made) to purchase their new PPR and will the interest on $100,000 i.e. $70,000 plus $30,000 redraw be tax deductible?

Answer – Yes they can redraw, but No the interest on the $30,000 portion is not tax deductible. This can be a very messy situation come tax time

Question — Can borrower 2 draw $30,000 from the offset account to purchase their new PPR and will the interest on $100,000 i.e. $70,000 plus $30,000 withdrawn from the offset account be tax deductible?

Answer – Yes they can use the offset cash towards the PPR and Yes the interest on the entire $100,000 is tax deductible.

The difference is that redraw effectively changes the “purpose” of the $30,000 portion of that loan. The purpose is to buy a home, not the original property (now an investment / tax deductible). When you draw money out of offset, the original loan remains intact and the purpose (from a tax perspective) does not change.

The numbers are the same, but the result after tax can be very different. It is however important to note that “offset” does not suit everybody and re-draw is often satisfactory for many.

Market and Risk Analysis

At First Point Group, we finance many property development transactions both residential and commercial. This article outlines a brief snapshot of key areas Lenders consider when approving residential property development proposals.

Risk Analysis

Client/Borrower: Is this a big project for the client? The experience and track record of the borrowers in property development is a key determinant of lender support

Builder: Experience and track record of builder is vital to ensure project completes on time. Are you comfortable as to the track record of your builder and their substance, ability to fund project until the Lender pays progressive draw downs. Have you viewed other sites completed by the builder and the quality of these projects and spoken to people who have used builder?

Construction: Your budget must be robust. Many clients operate in rounded numbers which can be an indication that project has not been costed in detail. I always find this a trap for first developments with cost overruns becoming greater than expected causing pressure to complete.

A fixed building contract is mandatory if you are not the builder. Ensure your costs include GST and that you are aware of any GST liabilities you have and any credits you may be allowed if developing to sell.

Market

Have you spoken to a valuer/trusted agent who can give you a realistic assessment of whether the market is ready for your development. What other developments are coming on stream in your area. Pre sales may be required by the

Lender.

What part of the real estate cycle are we in? Will the development be completed on time, within budget, to the quality stipulated and sell readily to clear the Lenders debt?

Security: From a Lenders perspective, the location, development and design are the key aspects. Does the development fit the area? Will the property sell within the required timeframe?

Interest: Capitalisation of interest is allowed on many projects, but not all. If capping is requested, then the project must be strong across all risk components above. Is there capability of the client to cover interest if necessary?

Please contact Peter, Simon or David on (03) 9882 2500 or contact us below.

When is a pre-sale really a pre-sale?

One of the key criteria to meet with most Property Development/Bank Lenders is pre-sales. Likely one of the banes of a Developers life other than accessing funding for the project but the two do run “hand in hand” with pre-sales required to often get a start at obtaining finance in most cases.

But when is a pre-sale really a pre-sale and meet the Lenders pre-sale requirements?

In most cases the Lender will require you to hold a 10% cash deposit with an executed contract for it to be considered a qualifying pre-sale. If you have any contracts with a 5% deposit, you may negotiate to include these as qualifying pre-sales, but you need to discuss this with your Lender before making the sale and accepting 5% deposits on contracts. The sale also must be at arm’s length, where the seller and purchaser act independently of each other.

One of the major variances between the various Lenders and their pre-sale requirements is to do with foreign non-resident purchasers. A few of the Lenders will allow around 20% – 25% of your required pre-sale coverage to be from foreign purchasers, whereas others will often refuse to allow any pre-sale contracts for foreign purchasers, as they argue it is way too difficult to pursue them offshore, should settlement not proceed for any reason.

Some other common pre-sale hurdles include:

Multiple sales to a single purchaser – often a maximum of two sales per individual or entity unless capacity to complete is demonstrated to bank
Settlement date on contract must be a maximum of one month post the notice of completion or issue of strata titles.
Sunset (or termination/recession) date must be a minimum six months post acceptable schedule for practical completion.

You need to consider you are targeting the right qualified pre-sales that are moving you closer towards overcoming your pre-sale hurdles put in place by your Lender?

Please don’t hesitate to call Peter, David or Simon at First Point Group if you need any assistance with development funding on (03) 9 882 2500 or contact us below.

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First Point Group can access some of the BEST RATES in the market

Property FAQs